Richard C. Longworth, senior fellow at The Chicago Council on Global Affairs, contributes his knowledge and ideas about issues that affect the Midwest.

Wednesday, October 22, 2014

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Tuesday, October 14, 2014

The Midwest, like the rest of the United States, lives largely on trade. But if we leave trade policy to officialdom in Washington, that lifeline is in danger.

This is the impression I took away from a recent Washington conference on trade. It was definitely a pro-trade affair, dedicated to celebrating and strengthening America’s global trade position. As such, it attracted a crowd almost evenly split between business and industry people, government officials and journalists – all folks who should know what’s going on in this field.

The text for the day was an excellent paper by Matt Slaughter, a highly-regarded Dartmouth professor and a government advisor under both Republican and Democratic administrations. Slaughter’s paper, “How America Is Made for Trade,” gave a national view to a series of regional papers sponsored by HSBC bank, including one I wrote on the Midwest’s trade in manufactured goods.

For me, the high (or low) point of the day was what the audience thought of Slaughter’s suggestions for strengthening U.S. trade policy.

Slaughter noted that the forces of trade have produced “globally engaged companies, each determining and building its strengths connected to the world to ensure continued success in keenly competitive world markets.” But at the same time, he said, “America today continues to confront a competitiveness challenge of too few quality jobs and too little income growth.”

There’s a solution, he said, that “could create 10 million new trade-connected jobs in the next decade if (the U.S.) pursues an expansive and connected set of pro-trade policies in the areas of international trade, investment, immigration, tax, and the social safety net.” Specifically, he urged five policy goals:

Enact international trade agreements, especially TTIP, the transatlantic deal with the European Union, and TPP, the Trans-Pacific Partnership with 11 trade partners in Asia.

Liberalize high-skilled immigration, to bring in more educated and entrepreneurial immigrants.

Tax reform, to simplify and lower the tax burden on American corporations operating globally.

Reauthorize the Export-Import Bank and update its rules.

Strengthen the safety net for American workers, to help workers hurt by trade, spread the benefits of trade, and maintain broad political support for free-trade policies.

The audience at the conference was asked to vote on these proposals. The trade agreements and the tax reforms dominated: each got 43 percent. The proposals on immigration and the Ex-Im Bank came in far behind. And the recommendation on help for workers got exactly one vote.

What’s wrong with this picture?

I guess if one is in Washington, where taxes rank with Ebola as a threat to civilization as we know it, a knee-jerk vote for lower taxes is only to be expected. But the sorry support for the workers – that is, for much of the rest of the nation – is dismaying.

The connection between trade and the social safety net is probably not broadly understood. But all trade experts get it. Slaughter laid out the case clearly.

Trade causes both gain and pain. Trading with the world brings in new, better and cheaper products, strengthening and enriching the economy as a whole. That’s the gain. But it “is not evenly shared and does not directly benefit every worker, firm and community,” Slaughter said. Too many workers today fear the impact of trade on their lives.

“Their concerns are real, widespread and legitimate,” he wrote. “Left unaddressed by policymakers, their concerns will likely translate into weak and waning support for the kind of pro-trade policies recommended (in his paper.)”

The overall economy benefits whenever the U.S. imports a better or cheaper widget. But this benefit is felt broadly across society. Local widget-makers, though, feel a lot of intense and specific pain – possibly the loss of their jobs. If their widget factory closes, this intense pain is felt in their towns. This is the story of Delphi in Dayton, GM in Flint, Maytag in Newton.

When new free trade deals are proposed, how enthusiastic do you think those GM or Maytag workers will be? On election day, politicians who backed these deals have to face these angry ex-workers.

Major trading countries have always known this. This is one big reason why industrialized European nations, such as Germany or France, have stronger social safety nets. Trade has long accounted for a major share of their economies. They also know that what’s good for their nations may be painful for individual workers. If they want to keep support for free-trade policies, they know they must provide generous unemployment pay, vigorous retraining and monetary aid for stricken towns and cities.

In overall dollar terms, the U.S. has been a major trading nation for decades. But because of its huge domestic market, it has exported relatively little of its total output. The World Bank says that trade – both exports and imports – amounts to 23 percent of American gross domestic project. In Germany, it’s 75 percent.

Traditionally, the impact of trade here has been so localized that policy-makers and politicians seldom had to worry about it. In recent years, this impact has expanded to embrace whole industries and cities. Latest public opinion polls, including one by the Chicago Council, show little support so far for protectionist measures. But as Slaughter recognized, it’s a potential problem to be met.

A wave of protectionism, in fact, could do much more damage than a breakdown in international trade talks or taxes on businesses. In a globalizing world, it could take America out of the game.

If anybody in Washington is even thinking about this, I saw no sign of it. Perhaps these folks should get out more. The former factory towns of the Midwest would be a good place to start.

Tuesday, October 07, 2014

The American South races ahead, creating a society based on excellence, while the Midwest lags behind, mired in the tradition of a glorious past.

Chicago excepted, of course.

That’s the contention of Aaron Renn, who blogs as The Urbanophile. Like all of Renn’s work, it’s informed, provocative and required reading. Which is not to say he’s right.

As you’ll see, Renn notes that the South has seized national dominance in college football – currently, seven of the 10 top-ranked teams are in Dixie. He quotes the New York Times’ explanation:

“The SEC sold excellence. The Big Ten sold tradition.”

Renn then goes on to say that Southern cities are creating a new and superior civilization, through sheer ambition and imagination, while the Midwest slowly decays. Southerners, he says, have “massively elevated their game in the last 40 years and are working hard to keep getting better...Meanwhile, the Midwest is regressing towards what the South used to be.”

He cites new and expensive arts and infrastructure projects in cities such as Charlotte, Dallas, Atlanta and Nashville, mostly because (as they say in Charlotte) “we don’t want to be No. 2 to anybody.”

Renn asks: “Outside of Chicago, does anybody in the Midwest talk like that?

As a Chicagoan, I’m grateful that our town is exempted from this litany of woe. But I wonder: does Chicago’s very success explain a lot of what’s gone wrong with the rest of the Midwest?

Smaller Southern cities such as Charlotte and Nashville have resources today because they’ve lost less over the years than similar Northern cities. Most didn’t have legacies of heavy industry to overcome: those that did, such as Birmingham, aren’t doing so well. The same cities benefitted in the last half of the 20th century from the movement of industry from the Midwest to the Sun Belt: low wages, anti-union legislation and air conditioning had more to do with this than ambition and imagination.

But I’d suggest that another reason lies in the fact that Chicago stands out as the one Midwestern metropolis that has shaken off its Rust Belt torpor and is coping with global competition. This is good for Chicago, but not so good for the rest of the region.

No one city dominates the South as Chicago dominates the Midwest. Even Atlanta, the capital of the South, is barely one-eighth as big as Chicago, and its metro region is only half that of the Chicago metro.

In the global economy, sheer size is a great big magnet, drawing in the resources and people from the surrounding region. We see this in the exploding cities of China, India and South America. We see it in Europe, where London booms while the rest of England slowly rots.

And we see it in the Midwest where, as the urbanologist Richard Florida has written, Chicago has simply sucked the life – the finance, the business services, the investment, especially the best young people – out of the rest of the Midwest.

To any young person in Nashville or Charlotte, the home town offers plenty of opportunities for work and a good life. To any young person stuck in post-industrial Cleveland or Detroit, it’s only logical to decamp to Chicago, rather than to stay home and try to build something in the wreckage of a vanished economy.

Not that some don’t try. Several Midwestern cities, like their Southern counterparts, had less of an industrial legacy and, like them, are doing well now: places such as Indianapolis, Columbus, Minneapolis and Des Moines come to mind. Other cities, such as Grand Rapids and Kansas City, blossom today with the same kind of ambition and imagination that Renn sees in the South.

And if Big Ten teams can’t whup Alabama or Auburn on a Saturday afternoon, the rest of their universities remain centers of academic excellence. Renn grants this, but he’s right to worry about it: many of the Midwest’s finest research universities are state schools that suffer from declining state support. Might there come a day when Ole Miss or Florida State simply outspend Michigan and Ohio State for scholars as well as coaches and quarterbacks?

Put me down for a chauvinist elitist, but I’d still argue for the superiority of Midwestern civilization, as embodied in its arts and culture, over anything outside Bourbon Street. The industrial clout of the old Midwest paid for some marvelous museums and symphonies, many of which – the Cleveland Symphony and the Detroit Institute of Arts, for instance – survive today. But Renn points out that the Clevelanders have established an outpost in Miami, and Detroit’s creditors hope to seize the treasures in the city’s museum. Can artistic excellence survive when the economy that financed it goes away?

In the end, the South has far to go. Some infrastructure is nice, but racial voting restrictions and Bible-bound attitudes toward same-sex marriage leave the region stuck in its past, just as the brownfield sites of vacant factories keep the Midwest tethered to its own history.

The sheer forces of modernization that Renn cites will pull the South, one of these days, into the 21st century, socially as well as economically. In the meantime, the Midwest would do well to heed Renn’s warnings of the race to excellence, before it really does lose that race.

Friday, September 26, 2014

The Great Recession has spawned a shelf of books, many of them good, on what went so wrong. So far this year, we’ve had at least two first-rate books on where we are now and what will happen next.

The first was Capital in the Twenty-First Century, the much praised study of wealth inequality by Thomas Piketty, discussed here earlier. Now comes The Shifts and the Shocks: What We’ve Learned – and Have Still to Learn – from the Financial Crisis, by Martin Wolf, the esteemed economic columnist for the Financial Times.

Both authors argue that the big problems – inequality, for Piketty, or economic instability, for Wolf – are built into our free-market system, and are exacerbated by globalization. In other words, unless we not only reform but transform this system, both inequality and instability will get worse. Wolf predicts more crises, bubbles, busts, and recessions ahead and wonders just how much battering our democratic system can take.

Both authors propose reforms. But neither thinks his ideas have much chance of becoming reality any time soon.

Piketty commanded attention because of his unprecedented use of historical data to make his point. Wolf, who will be speaking to The Chicago Council on October 14, commands attention because of who he is. A former senior economist at the World Bank, he is today the world’s leading economic commentator whose columns are required reading in every central bank and world capital. Paul Krugman may stimulate more debate but Wolf, a centrist who draws his stately judgments from piles of data, sets the global economic agenda.

To be clear, Wolf is a mainstream economist who believes in capitalism and free markets, but thinks they are deeply – maybe fatally – flawed. His goal is to save them from themselves.

“Crises,” he writes, “are an inherent element of the market-based financial system, as we know it. They follow periods of rising fragility, created by the rise of apparently hugely profitable risk-taking generated within the system. So it was this time. Success bred excess and excess bred collapse.”

Over the past 40 years, he says, this system has fallen prey to forces and trends – including liberalization of finance, weak regulation, globalization, technology, rising inequality, huge savings imbalances – that produced repeated international financial crises, culminating in the Great Recession of 2007-2008.

The irresponsibility of bankers lies at the core of all these crises, and Wolf doesn’t spare them. But he assumes that bankers were just doing what bankers do, which is to make as many loans as possible, to good risks and bad, until it all seizes up in a crisis like the sub-prime mortgage fiasco.

But Wolf reserves the most condemnation for “the ignorance and arrogance” of the financial elites – academics like the Chicago School of economists, plus government officials and central bankers – who are supposed to keep bankers in check.

Like many post-recession economists, Wolf is a fan of Hyman Minsky, the late Chicago-born economist who taught that a capitalist economist swing “between robustness and fragility.” Booms start when some event, such as falling interest rates, triggers investment, which leads to rising prices for assets such as housing. This lead to “euphoria,” when bankers lend to anyone with a pulse. Eventually, smarter investors begin to pull out, which leads to panic among dumber investors, which leads to falling prices and, eventually, a recession. There’s a moment – dubbed the “Minsky moment,” when the bubble expands as far as it will go, prices stop rising, and the panic sets in.

In other words, capitalist economies are inherently unstable. This means they need firm regulation to avoid periodic calamities.

But this time, that adult supervision wasn’t there. Instead, free-market economists taught that markets are always efficient, imbalances are always self-correcting, and prices were always right. The logical conclusion of this thinking is that booms, bubbles and busts are impossible, so regulators should just get out of the way and let the good times roll. In theory, a crisis is improbable. In practice, Wolf says, “this insouciance….ends up making it far more likely.”

Wolf singles out two of the University of Chicago’s Nobel Prize-winning economists, Robert Lucas and Eugene Fama, for particular ridicule. He also says that Federal Reserve Bank President Ben Bernanke was “almost clueless” before the recession, but praises the Fed’s post-recession response for preventing a repeat of the Depression.

Wolf criticizes governments in Europe and the United States for the austerity-focused policies that have blocked a more vigorous recovery. But he’s more worried that we haven’t made the kind of basic reforms in the free-market system that would keep another recession at bay.

In particular, he fears the impact of savings imbalances, globally, and nationally. One cause of the recession, he says, was the huge “savings glut” in emerging countries such as China, which were loaned to developed countries such as the United States, which wasted the money on the housing bubble instead of using it productively on public programs, such as infrastructure repair. That imbalance remains, made worse by the post-recession savings glut of American corporations and consumers.

As before, Wolf says, we’re whistling in the dark.

“Much of the political and financial establishment pretends that everything will soon return to the old normal,” he writes. “This is not going to work.” A few reforms have taken place, but they’re “an attempt to preserve the essence of a system that we already know is extremely fragile, and which is sure to implode once again in our current world of global financial integration, fast trading and huge flows of funds across borders.”

More regulation is needed, especially in global markets, Wolf says. He would like to see sharply higher reserve requirements for banks, forcing them to set aside more money to cover severe losses. He also would like to see a sort of global version of the American Glass-Steagall Act, now repealed, which kept commercial banks from risking depositors’ income in investment banking.

Wolf also sees that the multi-trillion-dollars flows of money around the world is a global explosion waiting to happen. This global finance can continue, he says, only if there is global regulation. Otherwise, this global flow “might have to be sharply curtailed.” He implies this would be no great loss.

Unlike Piketty, Wolf presents no new economic theory, and much of what he has to say has been said by other commentators. The strength of his book is his ability to bring all this thinking together, to connect the dots, to demolish foolish ideologies, and to suggest a future that understands the mistakes of the past.

Wolf’s book, unlike many of his columns, can be tough going. As with Piketty, there are large internal stretches that can be jumped. Also, much of his book (ignored so far in this review) deals with the euro crisis. Americans should understand this, if only because a crisis in the world’s second biggest economy can impact us all. But some readers could be forgiven for giving these chapters a pass.

The real problem with the euro, he says, is the threat it poses to the whole postwar project of European integration. Similarly, the real threat of more global financial crises is the erosion of public faith in the ability of our elites – not only economists but government officials – to run the economy .

“The loss of confidence in the competence and probity of elites inevitably reduces trust in democratic legitimacy,” Wolf writes. The real threat to the future of democracy lies not in the rise of an authoritarian China but in the inability of democratically-elected leaders at home to deliver the goods.

Tuesday, September 16, 2014

For more than a century, the Midwestern landscape has sparkled with small educational gems, private colleges devoted to the liberal arts. Most of them are located in small towns and cities which boomed in the Industrial Age but have seen better days.

What is the relationship now between these small colleges and the towns that surround them? Can the colleges and the liberal arts help their towns recover their economic vitality? Can these schools ignite the revival of their towns, or are some of the towns so far gone that they might pull their colleges down into the wreckage of the post-industrial Midwest?

These thoughts were front and center last week when one of these colleges, Albion, inaugurated a new president, Mauri Ditzler, who has been president of another one of them, Monmouth, for the past nine years. Ditzler has made it his goal to use Albion College and the liberal arts in the revival of the town.

Albion, in southern Michigan, and Monmouth, in western Illinois, have much in common. Both towns have less than 10,000 people. Both colleges have about 1,300 students. Both the towns and their regions have suffered economically. Albion is probably in worse shape. Its economy was based on steel facilities and foundries that served the auto industry. Most are closed now. So are the town hospital and even the high school, which closed a year ago and now sends its students to Marshall, ten miles away down Interstate-94.

When we talk about economic revitalization, we usually think about business start-ups, high-tech innovations, venture capital. When we think about the role of education in his process, we usually think about the STEM disciplines (science, technology, engineering and math), not so much about poetry or philosophy.

But the liberal arts, by their nature, care more about the sweep of history than a moment in time. In personal terms, they deal more with careers than an immediate job. STEM skills are necessary, certainly. But only the liberal arts can deal with the larger sense of community, or rebuilding a society, not just an industrial park.

Ditzler has experience with this. Once, no college or university in the Midwest even taught a course about the Midwest – its history, economy, people or literature. At Monmouth, Ditzler inaugurated the Midwest Matters Initiative, a series of courses on Midwestern issues, and helped the college turn its region, in western Illinois and eastern Iowa, in a laboratory for the study of issues such as economic development and immigration.

At Albion, Ditzler’s first job is to let the town know that the college cares.

Albion belongs to the Great Lakes Colleges Association, a grouping of 13 small liberal arts colleges, including Antioch, Hope, Earlham and Oberlin. Monmouth is one of 14 colleges in the Associated Colleges of the Midwest, 14 schools further west, including Carleton, Grinnell, Lawrence and Knox. Most of these are first-rate schools set in small towns, with enrollments of about 1,300 to 3,000 students.

Some of these schools play an active part in their communities. But as Ditzler says, too many of them pretend they are misplaced islands of academic excellence, schools that think they belong in the Ivy League but which somehow took the wrong exit on their way to Connecticut. These schools spend their time ignoring the working-class towns around them. The towns sense this arrogance and return it. Most students spend four years there, then grab their diplomas and head for the cities.

Albion the college already encourages its students to volunteer and intern in Albion the town. But the most recent college president lived on a farm outside town. Ditzler’s residence is in town, across the street from the college. The street itself is a dividing line, with the college on one side and a declining neighborhood on the other: Ditzler is living on the neighborhood side of the street. Sure, it’s just symbolism, but it gets noticed, and it counts.

As a liberal arts college, Albion has its historians, to tell the town where it’s been, so it can think about where it’s going. It has its economists, who should leave their equations to explain this strange new global economy that has so battered the town. It has its sociologists, for whom the social impact of global change should be a natural course of study. It has its writers who can describe the town to itself, as Southern writers have been defining Dixie since the Civil War.

All this will take time, and an enormous amount of tact. In almost every Midwestern college town, the town-gown split is real. This is true in Albion, where the school is mostly white and well-to-do, while the town is 30 percent black and largely poor: a recent survey found that 63 percent of Albion residents earn too little to meet basic living needs. The first job may be to decide what the two Albions, town and college, are going to talk about.

At the same time, the college can use its worldview and outside connections to embed the town in a broader region, to leverage the strength of its neighbors. With 8,600 people, Albion is too small to compete in the new post-industrial economy. It lies along the I-94 corridor with Kalamazoo, Battle Creek and Jackson, all larger industrial cities to which it could hitch its star.

That Great Lakes Colleges Association includes 12 other similar schools in 12 other towns, most of them facing the same problems, asking the same questions and seeking the same answers. That I-94 corridor also houses some fine schools, private and public, including Western Michigan University. Ditzler’s pioneering work at Monmouth on Midwestern regionalism is a natural model.

Albion, like so many other small Midwestern factory towns, already has two strikes against it. It needs all the help it can get. It may take more than a liberal arts college to turn it around, but it’s encouraging to see such a college emerge from behind its academic walls to take on the challenge.

Tuesday, September 09, 2014

The beheadings by ISIS of two American journalists can be called many things – medieval savagery, unconscionable cruelty, the pointless murders of two brave men. But one thing they are not is an attack on the United States that demands retaliation by the American government.

I say this as a former correspondent, in full admiration for James Foley and Steven Sotloff and in sympathy for the terrible price they paid for plying their trade in the most dangerous place in the world. What’s more, I think Foley and Sotloff would agree.

To understand why, it’s necessary to talk about what war correspondents do, why they do it and, especially, their relationships with governments and officials – not only with foreign governments or foreign forces such as ISIS but with their own.

American journalists are an independent lot. They see themselves as lone warriors, answerable to no one but their editors and their readers. Most newspapers have ethics codes forbidding reporters to accept gifts or free trips – nothing more than a lunch, and sometimes not even that – from a government or corporation or any other organization on their beats. White House correspondents pay full fare to fly on Air Force One. Back home, education reporters are forbidden to run for their school boards.

This may sound too pure to be credible. But it’s a deeply ingrained belief. Just this month, the Chicago Tribune printed a shame-faced story reporting that one of its former Washington correspondents, assigned to cover the CIA, showed the CIA copies of his stories in advance. The point was that this cooperation between reporters and government is unacceptable and that the Tribune considered this journalist a pariah.

In Washington, this line can be very thin. No US government official would dream of bribing a reporter with gifts or money. But friendship with the powerful is a potent lure. Whole seminars and conferences are devoted to the ethics of these relationships.

Overseas, this relationship is even more complicated. In war reporting, it can be fatal.

Most foreign correspondents crave action and excitement: it’s a big reason why they do what they do. With war correspondents, this craving goes to extremes. There is a breed of correspondents, called the war-lovers, who are drawn to conflict like moths to the flame, and aren’t happy unless they’re in danger.

I once ran into Peter Arnett, the legendary AP and CNN correspondent in Vietnam and Baghdad, when he was running the CNN bureau in Moscow. It was the late ‘80s, as the Soviet Union was crumbling – a terrific story if there ever was one. And Arnett was bored. Wars turned him on. The peaceful end of the Cold War didn’t.

Chris Hedges, himself a war correspondent for The New York Times and a self-confessed war-lover, wrote a wonderful book called “War Is a Force That Gives Us Meaning.” Hedges tried to explain the magnetic pull that war exerts on journalists – and not just on journalists. War may be the most vivid and meaningful thing that happens in a person’s life, he said, which is one reason why so many civilians look back on wartime with nostalgia, and why so many nations actually choose to go to war.

What is this lure? I was never a war-lover. While I admire war correspondents, I don’t share what drives them. There is, undoubtedly the adrenaline rush from waking in the morning not knowing for sure that you’re going to be alive at night: the evening drink tastes doubly sweet. There is the excitement of seeing life at its extremes: one colleague told me once that, in war, the reporter sees both the best and worst of humanity.

There is the knowledge that the reporter in Iraq or Afghanistan or Vietnam is going where his readers can’t. He represents them, has the duty to tell them what’s happening. If the United States is involved, there’s a double duty of describing to them their tax dollars at work.

(In the preceding paragraph, I used the pronouns “him” and “he,” as though war correspondents are all men. In fact, many of the best and bravest these days are women. Liz Sly and Carlotta Gall come to mind. Marie Colvin made one too many trips into Syria, and was killed. An AP photographer was killed and an AP correspondent wounded in Afghanistan recently when an Afghani policeman opened fire on them: both were women.)

The best reporters, I think, are driven by a compulsion to witness. They go places where people trapped in history are dying or suffering, with no one to tell their names. Through their work, the correspondents validate the lives of these victims and explain the inexplicable.

I have no idea what drove Foley and Sotloff. Maybe all these motives. Maybe just a desire for fame: being a war correspondent can be a good career move, if you survive.

But I’m sure they never considered themselves as official representatives of America or its government. Like most reporters, they probably had gone to places where the United States government didn’t want them to be and reported things the government wished unreported.

This tension, this adversarial relationship, is crucial to good journalism. In some wars, such as World War II, American journalists took sides. (Also, their stories were censored.) But in Vietnam, the reporting by American correspondent was crucial to eroding public support for the war: at one point, Secretary of State Dean Rusk cried out to a reporter, “Whose side are you on, anyway?” The proper answer: “Not theirs, sir, and not yours either.”

In Iraq, reporters endangered this independence by embedding with US troops. Later, though, the same reporters told the country how badly Washington was mishandling its mission there. Soldiers and diplomats who hated the press and complained that reporters made their lives more difficult had a point: the reporters are there not to help the troops but to tell Americans what’s being done in their name.

It would be easier if the United States was always right and its policies impeccable. But in war and peace, this is seldom true. Journalists work to reflect reality, no matter the danger.

In previous wars, correspondents like Arnett and Hedges worked fulltime for big corporations who felt an obligation to do everything to protect their reporters. When a Chicago Tribune colleague was arrested in Sudan, the paper hired a private jet: the editor and former Energy Secretary Bill Richardson, a friend of the Sudanese president, flew to Khartoum to free him.

The Tribune doesn’t have foreign correspondents any more. Most news organizations don’t send staffers to cover wars. Instead they rely on free-lancers, intrepid reporters who want to cover a war but aren’t employed full-time, because there aren’t many full-time jobs these days. They get paid by the piece and, if they get into trouble, they are on their own.

Foley and Sotloff were free-lancers. They tried to find stories that various publications back home would print. But they had no salary, no health insurance, no institutions looking out for them. They weren’t working for the government: in fact, they were going where the administration fears to tread and reporting on the failure of America’s Mideast policy, knowing that if they got into trouble, they couldn’t call on the government for help.

And they did get into trouble, big trouble. They became what any journalist fears to be, which is part of the story. They would be appalled to think that their fate required a government response.

There could be more Foleys and Sotloffs, because they are the only way the rest of us find out what the world is really like. As Mort Rosenblum, one of the best foreign correspondents, wrote: “To report, you have to be there. Reporters must get up the road. If they’re not there, neither are we.”

Obviously, the concept of “an informed electorate” has no meaning unless someone does the informing. Our future depends not on tweets and twitters from random sources but on solid reporting by professionals who know how to get to the scene and to understand what they see there. At the moment, few American media outlets are willing to pay such people to do this and to protect them when trouble looms.

The government won’t do this, and shouldn’t. The price – the loss of independence – is more than any reporter wants to pay. But unless American journalism recovers this sense of mission, there will be ever fewer Foleys and Sotloffs willing to do this vital work.

Wednesday, September 03, 2014

When the Midwest votes on November 4, it will have a major – perhaps decisive – impact on the balance of power: both in Congress and in the region’s statehouses. But oddly enough, it won’t tell us much about the national mood or influence any national arguments.

With Labor Day just past, we’re now into the political season. Between now and election day, the many races that have been growling in the background will move to the front burner.

The Midwestern states are the traditional swing states. Except for Republican Indiana and Democratic Illinois, most political races in this region – especially for statewide offices, such as for governorships and US Senate seats – can go either way. For that reason, many pundits will look to these off-year elections for clues to how the region will vote in the presidential ballot two years from now, when the candidate who wins the Midwest will probably win the White House.

Senate seats are at stake in Iowa, Minnesota, Illinois and Michigan. Voters will elect governors in Minnesota, Michigan, Wisconsin, Ohio, Illinois, and Iowa.

All four Senate seats are held by Democrats and the loss of any of them could help tip control of the Senate to the Republicans. At the moment, Democrats hold the lead in polls in Minnesota, Illinois and Michigan, with Iowa a tossup.

Because of their impact on the balance of power in the Senate, the races will be closely watched nationally. But analysts who expect them races to provide pointers to 2016 will probably be disappointed.

The reason is that, once again, most politics is local. No doubt some voters will be swayed by national or international issues, such as Obamacare or fighting in the Mideast. But the big issues in the Midwest this year seem resolutely local.

Iowa is the perfect example. One of the Senate’s Democratic titans, Tom Harken, is retiring, and the battle to replace is being fought by Jodi Ernst, a Republican member of the state Senate, and Bruce Braley, a three-term member of the U.S. House. Ernst is best known for a TV campaign commercial in which she boasted that “I grew up castrating hogs on an Iowa farm…….so I’ll know how to cut pork” in Washington. For his part, Braley warned that Republican control of the Senate would make Iowa’s other senator, Charles Grassley, the chair of the Senate Judiciary Committee, even though Grassley is “a farmer from Iowa who never went to law school.” Braley, himself a farmer, had to apologize to Grassley, but it was a gaffe in Iowa, where most voters may live in cities but still take farmers seriously.

In this exchange of cow pies, the national interest isn’t getting much attention.

Most polls say this election is too close to call. Not so the Iowa gubernatorial race, where the incumbent, Gov. Terry Bransted seems to be safely ahead. Again, no national trends can be spotted here. Bransted is a moderate Republican who is generally admired for leading the state through a period of relative prosperity. In addition, he is one of the few governors who doesn’t seem to want to be president.

Three other gubernatorial contests are more interesting, and considerably tighter. But all three are being fought, at least partially, on the issue of labor rights – an important issue, to be sure, but not at the top of the national agenda.

Most attention is focused on Wisconsin, if only because the Republican governor there, Scott Walker, has led the fight to neuter public service unions and hopes to ride this reputation into the presidency in two years. His Democratic opponent, businesswoman Mary Burke, is talking less about Walker’s restrictions on collective bargaining rights for public service unions, and more on his failure to make good on his promise to add 250,000 jobs to the Wisconsin economy. At the moment, the race seems to be a dead heat.

In Michigan, Govemor Rick Snyder, a Republican, is in a tight race with Mark Schauer, a former US Representative. Snyder got national notice when he signed a bill making Michigan a right-to-work state, but the election seems to be turning more on the overall performance of the state’s economy. Latest polls show Snyder with a persistent but narrowing lead.

In Ohio, the Republican governor, John Kasich, also tried but failed to restrict union collective bargaining rights. But Ohio’s economy has begun to recover, partially because of the natural gas boom, and polls show him running ahead of the Democratic candidate, Ed FitzGerald, the Cuyahoga County (Cleveland) executive, who has run an inept campaign.

The other big gubernatorial race is in Illinois, where Governor Pat Quinn, a Democratic, is challenged by a billionaire private equity manager named Bruce Rauner. Given that Illinois’ deficits and unfunded pension woes show no sign of ending, Quinn would seem to be ripe for defeat, and most polls show him trailing. But Rauner, who has put $9.6 million of his own money into his campaign, has been vague about how he would deal with these budget problems. Quinn is a good campaigner and the race could tighten by November 4.

In the other gubernatorial race, Minnesota’s Democratic Governor Mark Dayton has a solid lead over his Republican foe, Jeff Johnson.

The same is true in Minnesota’s other big race, where Senator Al Franken remains a likely winner for re-election over Republican Mike McFadden.

One of the Senate’s old lions, Illinois Democrat Dick Durbin, seems a good bet to defeat Jim Oberweis, a dairy tycoon and perennial Republican candidate best-known for pushing stricter laws on immigration. Oberweis’ campaign so far has involved mostly radio ads accusing Durbin of various back-door deals: so far, none of this mud seems to have stuck.

In Michigan, another Democratic old lion, Carl Levin, has retired, setting up a race for his seat between US Representative Gary Peters, a Democrat, and Terri Lynn Land, a Republican former secretary of state. Peters has overtaken Land’s earlier lead in polls, but the race is still tight.

Thursday, August 28, 2014

So many Midwestern towns and cities have lost so much. Local banks vanish. So do local banks, high schools, businesses. In both small towns and the poorer neighborhoods of big cities, too many components of civilization have gone away.

But when much else goes, libraries remain. Like schools, local libraries stand as outposts of learning and windows on to a wider world. In a time when many Midwestern children - urban and rural both – grow up in a bookless world, libraries offer a vision of another and richer way to live.

Several things recently have brought this to mind. One is the violence in inner city regions, from Chicago’s Englewood to the St. Louis suburb of Ferguson, where young people are growing up in poverty, in homes where paying the electricity bill takes priority over books, where the road to a better life can be very hard to find. These are bad places to grow up, but they almost all have public libraries – Englewood does, and so does Ferguson - where young people can read, and dream.

Another was a recent article in the Chicago Tribune about graduates of the Urban Prep Charter Academy for Young Men who have gone on to college. Urban Prep is a group of inner city schools, working only with boys, with the aim to get them out of their neighborhoods and into good schools. Mostly, it succeeds – but the article made it clear that these students, once on campus, often struggle to make up for boyhoods that left them unprepared to compete.

One of them, Tyler Beck, said he felt he was in a foreign culture when he arrived at Trinity College in Connecticut, and books had a lot to do with it.

“I’m from the South Side,” Beck told the Tribune. “We just didn’t talk about books the way they did here.”

Another was the celebration here in Chicago over the Little League national championship won by an all-African-American team from the South Side of Chicago. The town turned out for a victory parade and celebration. All the politicians, not to mention Jesse Jackson, were there to talk and get their pictures taken, but the real point was that these kids have emerged from their neighborhood – next door to the Roseland neighborhood where Barack Obama got his gritty start in Chicago – and have seen a wider world. Sports that do that – for a talented few. Libraries can, too – for anyone who walks in the door.

Finally, I read a blog written by a high school classmate of mine, Mo Kelley, about the small Iowa town where we both grew up. In his most recent blog, Mo included a reminiscence from a woman recalling a librarian named Helen Stevens, who loved to read stories to children by the fireplace in the library basement.

“The building has been well maintained,” the writer, Rae Ann Clark, said, “and even with the updates, if you visited the basement as a child, you could still visit today, close our eyes and remember Helen doing her story times in front of the fireplace which is still there.”

I was one of those children. I didn’t know it then, but I was getting a leg up on life just from being read to by a librarian who knew that we needed stories to understand the world we would inhabit.

We didn’t know how lucky we were.

The good news is that libraries are still there, and are still being used. It’s a rare small town across the Midwest that doesn’t have a public library, open six or seven days a week, run by a handful of employees, mostly women, who are heroes, whether they think of themselves that way or not.

In an era of TV and video games, both adults and children still come to these libraries. I’ve never been in an empty one. Especially after school, kids pour in to read books or use the computers. (The librarians keep a sharp eye, to see what’s being watched on the computer screens.)

It’s fashionable to declare the death of books, whether by Amazon or indifference. It seems that most commuters these days are listening through earplugs, not reading (although they may be hearing audio books). But if books are dead, the word hasn’t reached libraries.

Unlike schools, libraries are non-controversial. Everybody loves them. Every once in a while, some local Torquemada sponsors a boycott of Judy Blume or Mark Twain. The librarians stand their ground, the ACLU rides to the rescue and the silliness is soon squashed.

But the libraries, if free to the public, aren’t free to run. All scrape by on small budgets and diminishing staff. Two years ago, Chicago instituted a Monday closing – since rescinded – on its branch libraries. Helen Stevens knew she had a lifetime job: the townspeople even voted a one-cent sales tax to enlarge the library there. Today’s librarians have no such assurance.

Philanthropists love to lavish money on university hospitals and football stadiums. If they really wanted to do the maximum amount of good, they should endow the future of local libraries. For sheer civilizational impact, these may be our most valuable institutions.

I know, donors love to see their names emblazoned on hospital wings or arenas. But nothing says that libraries can’t similarly salute their benefactors. If Andrew Carnegie enjoys immortality, it’s through the libraries he funded, not the steel he made.

One purpose of education is expanding horizons. Especially in small towns or inner cities, the horizons can be awfully narrow. Parents should be reading to children at home but we know this often doesn’t happen. If these children are going to glimpse the possibilities of life, it will be through books, in the libraries where these books await them.

Tuesday, August 19, 2014

American corporate leaders love to complain about the nation’s high corporate tax rate, one of the highest in the world. This rate, they say, is stifling business investment and encouraging U.S. corporations to move their headquarters to other countries.

It sounds logical. But it may not be true. A scholarly look at global tax payments, coupled with an on-the-ground look at the effect of taxes on business investment, suggests that these corporate leaders not only are crying wolf but may be blowing smoke.

(This may seem an odd topic for this blog this week, considering the urban crisis here in the Midwest, in the St. Louis suburb of Ferguson, where mutual distrust between black residents and white police has exploded into violence. I’m going to give this a pass for the simple reason that I haven’t been in Ferguson in years and know nothing about what’s going on there now. This hasn’t stopped a legion of pundits and tweeters from sounding off, even though they haven’t been there either. I don’t choose to add my uninformed opinion to theirs.)

Now, where were we? Oh yes, corporate taxes.

Corporate leaders have been beating the drum for corporate tax reform, by which they mean corporate tax cuts. The U.S. rate is 35 percent, which is one of the highest in the developed world – Japan’s is highest, at 38 percent – and above the average 24 percent for the 34 advanced countries that make up the Organization for Economic Cooperation and Development (OECD). The rate in France is 33 percent, in Germany 30 percent, in Britain only 21 percent.

Many of these differences aren’t huge but the corporate leaders do have a point that our nominal tax rate is higher than that of most of our global rivals. The trouble is that these rates really are nominal, which the dictionary defines as “acting or being something in name only, but not in reality.”

The reality is very different, as a new paper by a law professor at the University of Southern California, Edward D. Kleinbard, says. According to Kleinbard, the big American corporations – the global corporations which are threatening to pick up and move – actually make out like bandits at tax time.

As any sophisticated corporation knows, there are various tax loopholes to keep that nominal rate nominal. One of the biggest, Kleinbard says, is the practice of keeping much of their income overseas and out of reach of the IRS. Altogether, he said, American corporations paid an effective tax rate of 12.6 percent in 2010, the last year for which figures are available.

Kleinbard said it isn’t the tax rates themselves that are tempting American-based companies to move their headquarters, if not their operations, to relatively low-tax venues such as Switzerland or Ireland. Instead, he said, they want to be able to use that money parked abroad without having to pay taxes on it. He estimates this hoard at $2 trillion: taxed at 35 percent, this would bring in $700 billion, which is more than the total U.S. government deficit.

This discrepancy between appearance and reality is an old story in Illinois, where major corporations such as Caterpillar regularly threaten to move to other states unless the state trims its 9.5 percent corporate tax. In fact, the state’s biggest corporations pay an average 3 percent in taxes and some pay nothing at all.

Does any of make any difference to corporate investment decisions, or any difference at all except for lowering corporate taxes and putting more of the burden on individual taxpayers?

The evidence is slim. Officially, the most “business tax-friendly” states, according to the Tax Foundation, are Wyoming, South Dakota, and Nevada. None of these is exactly overwhelmed by corporate investment. The reason, of course, is that big global corporations want to be in big cities, which have the best business services, the biggest airports, the best broadband, and the most amenities. All these benefits cost money: in the end, corporations will pay what they have to pay to be where the action is.

A story by Crain’s Chicago Business underlines this. According to this story, major real estate investors are paying record prices to buy property in Chicago and Illinois. That’s the same Chicago and Illinois that are staggering under huge public deficits, including unmet pension obligations, that seem certain to bring on property tax and other tax increases, sooner rather than later.

These investors know this, and are buying into the city and state any way. Why? Because they need to be here.

“Most, if not all, of our national retailers want to be here,” a real estate executive told Crain’s. “Chicago is one of the great cities and our retailers, whether they’re local, national or international, recognize that.”

Another executive said companies are simply building these expected tax hikes into their prices, confident they can recoup them.

This isn’t just true of Chicago, of course. Other major cities – New York, London, San Francisco - are seeing real estate and other costs soar, because so many corporations and global citizens want to invest there. These costs aren’t driving anybody away: instead, more and more people want in.

Actually, these costs are in fact driving some people away. These are the middle class and working class citizens of these cities, who are being priced out of town. Instead of cutting taxes for corporations and giving them tax breaks and other bribes to move in, the country and its cities and states would be smart to tax the corporations, which will pay if they have to, and use the money to subsidize ordinary workers who will indeed move out if they have to.

Thursday, August 07, 2014

Midwestern farmers need to have a good talk with the executives at Walgreens. Otherwise, they may end up like the big drugstore chain, with a big political black eye coupled with a hit to their bottom line.

As most readers know, Walgreens considered using its purchase of a European pharmacy chain to move its corporate tax headquarters to Switzerland. The so-called “inversion” would have saved Walgreens billions in corporate taxes over the years. But it also would have stiffed its American customers and communities, not to mention the country that nurtured its rise over the past 113 years.

The plan, coupled with similar moves by other companies, raised a political furor. Everyone from President Obama on down accused Walgreens of greed at best and treason at worst. After a few days of this battering, Walgreen caved and agreed to keep its corporate HQ in Illinois and, like its customers and employees, to keep paying taxes here. Walgreen’s stock immediately plunged about 20 percent – a pretty clear reading of the link between the interests of Wall Street and those of the rest of the country.

What does this have to do with farmers? Farmers, like Walgreens, are increasingly telling their neighbors, communities and much of the rest of the nation to go jump in the manure lagoon. These farmers already have lost the public relations battle. Pretty soon, they’re going to start losing the political war.

Three events this week are typical:

Voters in Missouri approved, by a razor-thin 50.1 percent margin, a state constitutional amendment “to ensure the right of Missouri citizens to engage in agricultural production and ranching practices.”The amendment, opposed by virtually every newspaper in the state but backed by the Farm Bureau and other farm lobbies, was seen as a barrier to any environmental regulation, including federal laws.

Toledo, Ohio, was the latest lakeside town to suspend the drinking of water from Lake Erie, because of the growing mats of poisonous algae fed by phosphorus washing from cattle feedlots and fertilized farm fields. Most pollution control in Ohio is voluntary, and ignored.

Officials in Des Moines, Iowa, say the same kind of algae is growing in Iowa rivers, and the city could easily face the same kind of drinking water ban. The state has a plan for farmers to reduce nutrients, such as phosphorous, but it’s strictly voluntary.

In all these cases, farmers are the villains. As with the Walgreen furor, this is true even if it shouldn’t make much sense.

Big farmers, like Walgreen, are some of our most valuable citizens. They feed this nation and much of the world. Their exports add billions to the nation’s trade balance. Most are pillars of their communities. We couldn’t do without these farmers any more than we could do without our neighborhood Walgreens.

But these same farmers, like Walgreens over the past couple of weeks, have become the people we love to hate. And, like Walgreens, they’ve brought it on themselves.

Anyone who pays attention to the debate over food – in newspapers, TV, online posts, even the movies – know that it is dominated by the foodie fringe, mostly activists in New York or California who love to bash “factory farming” and “frankenfoods” and to claim that urban farming and “locavores” are the answer to all our problems. The tribunes of this movement are people like Michael Pollan, Alice Waters and Mark Bittman, all of whom know more about cooking than they do about food.

This lot are so far removed from the way most of us eat that it should be easy to ignore them, while the real farmers get on with the job of feeding people. But the farmers are losing. As with Walgreens, it’s their own fault.

Walgreens forgot that it is a corporate citizen. Mesmerized by its bottom line, it ignored the fact that there are not just shareholders but stakeholders- - customers, suppliers, communities – that take offense when treated badly. These are the people who would lose if Walgreens defected to Switzerland. They got mad, and they won.

Anyone who’s talked with farmers knows they’re an independent bunch who deeply hate any government regulation. They’re few in number but they have powerful lobbies, led by the Farm Bureau and big agribusiness firms, who have enabled farmers to get their way so far, from environmental damage to the outrageous subsidies of the federal farm bill.

Like Walgreens, they’ve forgotten they are citizens whose deeds affect their neighbors and communities, from the folks next door all the way down-river to the Gulf of Mexico. They’ve forgotten that they owe a decent consideration to the society around them and to the people who supply their livelihood.

In Walgreen's case, this means paying taxes. In the farmers’ case, it means obeying rules and regulations that would limit and eliminate runoff of nutrients, such as phosphorous, that taints and even poisons the drinking water of other citizens downstream.

The big agribusiness companies, such as Cargill and Monsanto, generally join the farm lobby in fighting regulations. This is a mistake. These companies, especially Monsanto, are leaders into research into genetically modified organisms, or GMOs, which promise to boosts yields for an ever hungrier world. There’s no evidence that GMOs cause any harm, but the farmers’ foodie foes, wielding slogans like “frankenfoods,” have waged a scare campaign that has put these companies on the defensive. The companies would seem to have a political interest in showing that they really care about the environment.

This country needs big farmers, just as it needs drugstore chains like Walgreens. It would be nice to go back to the good old days of small farms and corner drugstores, but that’s not going to happen. The health of these farmers and these chains are entwined with the health of society. That society has just reminded Walgreens of this truth. Farmers could be next.

The Global Midwest Initiative of The Chicago Council on Global Affairs is a regional effort to promote interstate dialogue and to serve as a resource for those interested in the Midwest's ability to navigate today's global landscape.